Financial Cluster And The Formation Of Financial Center: Theory And Empirical Research For Shanghai

With the accelerating pace of financial liberalization, financial globalization has become the trend of the times. Which widen the global network of financial activities, speed up international capital flow and stimulate a large number of M&A among international financial enterprises. In consequence, financial activities and participants gather in some highly developed cities and regions. This phenomenon draws more and more attention from scholars who use different disciplines to explore the phenomenon. First of all, from the perspective of geographic location, a large number of academic studies suggest that geographic location and distance can influence the transmission of messages, which may cause participants to be close to the sources of information. Second, when the financial cluster reaches a certain level, the external economies of scale may improve the economic efficiency which will attract investors outside to join the rejoin and promote the cluster to reinforce by itself. Third, the cluster of other industry demand more financial services, which is the original driving force. Fourth, government policies, plays an important role in the formation of an international financial center.However, there is still a lack of comprehensive analysis of the drivers of financial cluster. So this paper will have a more complete analysis of the motive of the financial cluster based on the theory above, including detailed study of the role which the four factors play in the process of financial cluster. Then it will select Shanghai as an object of study, measure its extent of the financial cluster for 2007 and 2008.At last, the paper will propose some policy recommendations for Shanghai about building the international financial center according to the results of the study.The study shows that the external economies of scale has a great influence for the financial cluster, the economic strength of the city is also a very important factor, but the impact of infrastructure is relatively small. Therefore, in the process of constructing international financial center, we must exert the guiding role of government to improve the policy systems and formulate relevant preferential measures to bring more financial institutions to Shanghai, as a result, it can form the external economies of scale and promote the completion of the international financial center.